Bitcoin Plunges Below $62K as Stagflation Fears Grip Markets

Bitcoin (BTC) tumbled below $62,000 on April 25th as market sentiment was shaken by unexpectedly low US GDP growth and rising inflation. This "stagflationary" data pushed back expectations of Federal Reserve rate cuts, casting doubt on the prospect of a "soft landing" for the economy.

Bitcoin Plunges Below $62,000 as Stagflationary Macroeconomic Data Spooks Markets

Bitcoin (BTC) plummeted below $62,000 during the April 25 Wall Street opening bell, succumbing to concerns over the United States' worrisome macroeconomic indicators that have revived fears of stagflation, a dreaded combination of high inflation and economic slowdown.

GDP Disappoints, Inflation Soars

The release of the U.S. first-quarter GDP, which fell to a meager 1.6%, significantly below market expectations, triggered a wave of unease across financial markets. Simultaneously, consumer prices rose at a faster-than-anticipated pace, highlighting the daunting challenge faced by the Federal Reserve (Fed) in taming inflation.

"A 1.6% GDP reading would end six consecutive quarters of growth above 2%," remarked The Kobeissi Letter, a respected trading resource on X (formerly Twitter). "However, we haven't witnessed two consecutive quarters of declining GDP since Q2 2022. The question looms: is the economy starting to weaken?"

The Kobeissi report further underscored the surprising nature of the GDP data, which fell short of Goldman Sachs' forecast by nearly 50%.

Fed Rate Cut Prospects Fade

The disappointing economic data dealt a significant blow to market expectations for a loosening of monetary policy by the Fed. Previously, traders had factored in an interest rate cut as early as December; however, the latest data has substantially diminished those hopes.

According to the CME Group's FedWatch Tool, the probability of a rate cut at the next Federal Open Market Committee (FOMC) meeting on May 1 has plummeted to just 6.3%.

Bitcoin Follows Equity Markets Down

Bitcoin mirrored the downward trajectory of U.S. equities, particularly tech stocks, struggling to regain the ground lost in the previous week after a geopolitical dip below $60,000.

Bullish Sentiment Persists Amid Bearish Signals

Despite the overall bearish sentiment, some analysts remained optimistic about Bitcoin's future prospects. Popular trader Crypto Chase suggested that the BTC/USD pair could rally further to reach $68,000.

Other traders, such as Crypto Tony, predicted that Bitcoin would reach new macroeconomic highs before experiencing further consolidation.

STH Realized Price Provides Crucial Support

Analyst Caleb Franzen highlighted the short-term holder (STH) realized price, currently at $59,530, as a critical support level. This metric represents the average price at which STH entities—wallets holding coins for 155 days or less—last moved their assets. It has served as a reliable indicator of market support since the end of the 2022 bear market.

"If BTC falls below the STHRP, I'll turn bearish," concluded Franzen.

It is crucial to note that this article does not constitute investment advice. All investment and trading decisions involve inherent risk, and individuals should conduct thorough research before making financial decisions.